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Retailers, suppliers seek consensus on category management.

NEW YORK - Chain Drug Review hosted a roundtable on category management here last month in which retailers and manufacturers talked about mutual goals in an effort to arrive at a clearer understanding of what it takes to create a true win-win situation.

Retail participants included representatives from American Stores Co., CVS, Eckerd Corp., Fay's Inc., Genovese Drug Stores, Pathmark Stores Inc., Perry Drug Stores, Revco D.S. and Thrift Drug. On the manufacturer side, executives from Bausch & Lomb, Bristol-Myers Products, Chesebrough-Pond's Inc., Clairol Inc., Den-Mat Corp., Johnson & Johnson, Revlon Consumer Products Worldwide and Tambrands Inc. took part.

Others in attendance included representatives of the Chain Drug Marketing Association, Miller Brewing Co. and Nielsen Marketing Research.

While it's fair to assume that such terms as "partnering," "information sharing" and "trust" would crop up during any discussion of category management, the retailers and manufacturers reviewing those concepts during the roundtable wondered if partnering is really a misnomer, how much information it's wise to share and how much trust is prudent.

They concurred that, before any mutual undertaking is considered, a common definition of category management and, more importantly, joint goals must be clearly established. While category management has traditionally been defined as treating each product segment as its own strategic business unit, the Nielsen executives offered an updated alternative: "An information-based process that facilitates the retailer and manufacturer ensuring attainment of exclusive goals by focusing on satisfying the needs of the consumer."

That definition takes the too often misunderstood concept of category management and pins it down to a meaning that those in attendance seemed to be satisfied with. That is because, in the final analysis, it really doesn't matter how either the retailer or the manufacturer views the process; the consumer's perception is ultimately the only one that counts.

To take just one example, in which category does baby formula belong? Food? Nonfood?

Data can be assembled and countless arguments made both ways, but most consumers would look for it in the baby section. And if that's how they define the category, all other "logical" definitions must fall by the wayside.

That leads to other questions. For instance, is it still possible for anyone to do chainwide planogramming?

As one astute retailer put it, "If you are going to merchandise a baby category, you'd best be sure to have babies in the neighborhood."

Those in attendance agreed that scanning has made store by store planogramming not only possible, but virtually mandatory. But as effective as data generated at the point of sale has proven to be, those who count on it exclusively may have an accurate record of what happened yesterday and today, but be far less certain of what's coming tomorrow.

That makes information sharing vital. The manufacturers suggested that not only can they help retailers understand where the category is headed, but also exactly how much support it will receive.

Data from panels of consumers compiled by such companies as Nielsen and Information Resources Inc. can provide important insights into the marketplace. While the value of P-O-S data cannot be overestimated, it may not give enough weight to so-called "destination" brands with loyal consumer bases that build store traffic.

Retailers were unanimous in their belief that effective planogramming depends on a careful analysis of a variety of data, and that a successful category manager takes full advantage of all available resources. That person assumes total responsibility for all of the decisions related to his or her category - from planogramming to advertising.

Perhaps the thorniest issue raised concerns the choice of trade partners. Category managers must be diplomatic in selecting manufacturers to work closely with, while avoiding making others feel excluded. Though retailers obviously look toward category leaders, a consensus emerged that there are certain overriding questions all retailers must ask of potential supplier partners, including:

* Are they committed to working together for the long term? Is the potential partner prepared to devote the necessary resources to the endeavor?

* Is the synergy right? Does the manufacturer have a similar viewpoint?

* Which suppliers have the breadth of knowledge needed to help drive overall sales in a given product segment? Are they strong enough to expand the category or just take share from the leader in the field? Will their advertising be geared to benefit the category as a whole?

* Which manufacturers will customize programs to meet the retailer's needs?

After a decision is made, what generally occurs are regular "top to top" meetings between the retailer and the supplier.

Trust is key - but not blind trust. As one seasoned retailer said, "You put your trust in the people and organizations that have earned it, and after a comfort level has been established."

Those in attendance concluded that only then can data be pooled and category decisions made that will best meet the needs of consumers, increase overall sales in the category and improve profits for both the retailer and the manufacturer.
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Publication:Chain Drug Review
Date:Mar 13, 1995
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